Life’s setbacks come from different directions. The loss of a job or a diagnosis of a long term illness can expose our vulnerability. Fortunately, our legislature understood this issue and has passed laws that help protect our home during rough times.
Let’s look at an all too common scenario and the protection of one’s home at death.
An Unfortunate Scenario
Barry suffered a stroke at age 66. He is paralyzed. He has applied for Medicaid to help pay the $8,300 monthly cost of the nursing home he requires. His ranch home of 15 years is worth $160,000 with no mortgage. Barry has almost no money in his checking account because he uses all of his $2,100 monthly social security and pension income each month. He owes credit cards and prior hospital bills.
Fortunately for Barry, Medicaid will pay most of his nursing home costs. His $160,000 in home equity is ignored as an asset but since Medicaid will require that Barry pay his monthly income to his nursing home, there will be no money to maintain the home.
Protection of Your Home at Death
If Barry wants to leave his house to his kids he will be pleased to find out that his children can inherit the homestead free and clear, regardless of how much money Medicaid may have spent on Barry’s care. Yes, Florida protects a home from creditors like Medicaid, credit cards, and hospital bills. Our homestead is protected if we leave the house to close relatives at our death.
We Can Lose the Homestead Protection if We Do Any of the Following:
- Draft a Will so it states “sell my home at my death and pay the proceeds to my children”, (because we didn’t leave them the home);
- Leave our home to our neighbor, because they aren’t in the protected class of beneficiaries; or
- Convert our home to rental property, because we have given someone else the right to reside in the property and it may no longer be our “homestead.”